Bargain Hunting May Contribute To Initial Rebound On Wall Street

The major U.S. index futures are currently pointing to a higher open on Tuesday, with stocks likely to regain ground after moving sharply lower over the three previous sessions.

The markets may benefit from bargain hunting, as some traders look to pick up stocks at reduced levels following the recent sell-off.

With the steep drop on Monday, the tech-heavy Nasdaq tumbled to its lowest closing level since November 2020, while the Dow and the S&P 500 also hit one-year closing lows.

Buying interest may remain somewhat subdued, however, as traders remain wary about inflation, higher interest rates and the outlook for the global economy.

Traders may also be reluctant to make more significant moves ahead of the release of key inflation data in the coming days.

The Labor Department is due to release its report on consumer price inflation on Wednesday, with the annual rate of price growth expected to slow to 8.1 percent in April from 8.5 percent in March.

The latest snapshot of inflation could impact expectations regarding how aggressively the Federal Reserve plans to raise interest rates.

Following the sharp pullback to close out the previous week, stocks showed another substantial move to the downside during trading on Monday.

The major averages saw continued weakness going into the close, ending the session near their worst levels of the day. The Dow slumped 653.67 points or 2 percent to 32,245.70, the Nasdaq plummeted 521.41 points or 4.3 percent to 11,623.25 and the S&P 500 plunged 132.10 points or 3.2 percent to 3,991.24.

Significant weakness in overseas markets carried over onto Wall Street amid concerns about the outlook for the global economy.

Traders seem worried aggressive moves by global central banks to contain inflation could lead to a period of stagflation or an outright recession.

The extended sell-off on Wall Street also came as traders looked ahead to the release of key inflation data in the coming days.

Energy stocks turned in some of the market’s worst performances in afternoon trading, moving sharply lower along with the price of crude oil. Crude for June delivery plunged $6.68 to $103.09 a barrel.

Reflecting the sell-off in the energy sector, the Philadelphia Oil Service Index dove by 10.8 percent, the NYSE Arca Oil Index plummeted by 8.2 percent and the NYSE Arca Natural Gas Index tumbled by 6.7 percent.

Substantial weakness was also visible among airline stocks, resulting in a 7 percent nosedive by the NYSE Arca Airline Index. With the steep drop on the day, the index ended the session at a two-month closing low.

Biotechnology stocks also showed a significant move to the downside on the day, dragging the NYSE Arca Biotechnology Index down by 5.9 percent to its lowest closing level in over two years.

Gold, semiconductor, and commercial real estate stocks also saw considerable weakness on the day, reflecting broad based selling pressure on Wall Street.

Commodity, Currency Markets

Crude oil futures are falling $0.54 to $102.55 a barrel after plummeting $6.68 to $103.09 a barrel on Monday. Meanwhile, after slumping $24.20 to $1,858.60 an ounce in the previous session, gold futures are inching up $0.70 to $1,859.30 an ounce.

On the currency front, the U.S. dollar is trading at 130.01 yen compared to the 130.29 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0557 compared to yesterday’s $1.0561.

Asia

Asian stocks followed Wall Street lower on Tuesday amid worries that interest rate increases in the United States might stall global growth.

Regional markets ended well off their day’s lows after the Chinese government announced rent cuts and other aid for small businesses in a new effort to boost economic growth.

Sliding U.S. bond yields undermined the dollar and helped gold regain some ground in Asian trade, while oil edged up slightly after tumbling around 6 percent in the U.S. trading session on demand worries.

China’s Shanghai Composite Index rallied 1.1 percent to 3,035.84, and the yuan found some footing on Beijing’s vows to support the struggling economy,

Hong Kong’s Hang Seng Index tumbled 1.8 percent to 19,633.69 as trading resumed after a long holiday weekend.

Japan’s Nikkei 225 Index dropped 0.6 percent to 26,167.10, with losses capped by encouraging household spending data and a rebound in U.S. stock futures following a sharp sell-off overnight. Tech stocks led loses, with Advantest and SoftBank Corp falling around 2 percent each.

NTT Data Corp slumped 7.2 percent to extend losses for a second day running on restructuring news. Similarly, Japan Steel Works lost 15.6 percent to extend losses from the previous session after revealing that a subsidiary had falsified product data going back to at least 1998.

Australian markets ended off their day’s lows after new data showed retail sales volumes rose by 1.2 percent during the March quarter despite the spread of Omicron in many parts of the country.

The benchmark S&P/ASX 200 Index ended down 1 percent at 7,051.20 after having hit a three-month low earlier in the day.

New Zealand’s benchmark NZX-50 Index fell 1.3 percent to 11,229.45 due to weak cues from international markets. Ryman Healthcare bucked the weak trend to close 6.7 percent higher at $8.87.

Seoul stocks extended losses for the sixth day and the won hit a 26-month low against the greenback on worries about aggressive monetary tightening in the United States and prolonged lockdown measures in China. The Kospi dropped 0.6 percent to 2,596.56.

Europe

European stocks have rebounded on Tuesday, as investors seek bargains following four straight days of steep losses on fears of a recession and aggressive policy tightening by the U.S. Federal Reserve.

Germany’s 10-year government bond yield steadied close to an almost 8-year high amid expectations that traders might have gone too far in pricing future ECB rate hikes.

Also helping underpin investor sentiment, the German ZEW headline numbers for May showed that the Economic Sentiment Index improved to -34.3 from -41.0 previous.

Elsewhere, U.K. retail sales declined for the first time since January 2021 in April, new data showed.

While the U.K.’s FTSE 100 Index has climbed by 0.7 percent, the French CAC 40 Index and the German DAX Index are up by 1.5 percent and 1.6 percent, respectively.

Swedish Match shares have soared. The nicotine products company confirmed a takeover approach from larger U.S. rival Philip Morris.

British precision-measurement specialist Spectris has also jumped after it has agreed to buy California-based Dytran Instruments Inc. for $82 million.

Renault was marginally higher. The French car manufacturer said it would soon decide on the future of its operations in Russia due to the ongoing invasion of Ukraine.

Additionally, the company said it would sell just over a third of its Korea unit to China’s Geely Automobile Holdings for roughly $200 million.

Agriculture and pharmaceuticals firm Bayer has also risen after reporting better-than-expected earnings and revenue for the first quarter.

On the other hand, copper producer Aurubis has declined despite lifting its full-year operating profit forecast.

Fraport Group shares have also fallen. The airport operator reported a wider net loss in its first quarter, despite significantly higher revenues.

U.S. Economic Reports

Richmond Federal Reserve President Thomas Barkin is scheduled to speak in person on Why We Care About Inflation before the Cecil County Chamber of Commerce at 9:15 am ET.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $45 billion worth of three-year notes.

Minneapolis Federal Reserve President Neel Kashkari is also scheduled to moderate an Economic Club of Minnesota conversation with Federal Reserve Governor Christopher Waller at 1 pm ET.

At 3 pm ET, Cleveland Federal Reserve President Loretta Mester is due to participate in a panel on Monetary Policy and Financial Stability Challenges During Balance Sheet Normalization before the Federal Reserve Bank of Atlanta’s Financial Markets Conference.

Atlanta Federal Reserve President Raphael Bostic is scheduled to participate in a moderated dinner conversation on Monetary Policy and the Economy before the Atlanta Fed conference at 7 pm ET.

Stocks In Focus

Shares of Biohaven Pharmaceuticals (BHVN) are skyrocketing in pre-market trading after the migraine drug maker agreed to be acquired by Pfizer (PFE) for approximately $11.6 billion in cash.

Online used vehicle seller Vroom (VRM) is also seeing significant pre-market strength after reporting a narrower than expected first quarter loss on revenues that exceeded analyst estimates.

On the other hand, shares of Upstart (UPST) are plummeting in pre-market trading after the AI lending platform reported first quarter results that beat expectations but cuts its full-year outlook.

Fitness equipment maker Peloton (PTON) is also likely to come under pressure after reporting a wider than expected fiscal third quarter loss on revenues that came in below estimates.